The high costs of US health care

The Washington Post has an interesting article about this; but whilst it makes some useful and valid points, it completely ignores one major cost element. Let's start with a brief excerpt.

In 2009, Americans spent $7,960 per person on health care. Our neighbors in Canada spent $4,808. The Germans spent $4,218. The French, $3,978. If we had the per-person costs of any of those countries, America’s deficits would vanish. Workers would have much more money in their pockets. Our economy would grow more quickly, as our exports would be more competitive.

. . .

Americans don’t see the doctor more often or stay longer in the hospital than residents of other countries. Quite the opposite, actually. We spend less time in the hospital than Germans and see the doctor less often than the Canadians.

. . .

On Friday, the International Federation of Health Plans — a global insurance trade association that includes more than 100 insurers in 25 countries — released more direct evidence. It surveyed its members on the prices paid for 23 medical services and products in different countries, asking after everything from a routine doctor’s visit to a dose of Lipitor to coronary bypass surgery. And in 22 of 23 cases, Americans are paying higher prices than residents of other developed countries. Usually, we’re paying quite a bit more.

. . .

In America, Medicare and Medicaid negotiate prices on behalf of their tens of millions of members and, not coincidentally, purchase care at a substantial markdown from the commercial average. But outside that, it’s a free-for-all. Providers largely charge what they can get away with, often offering different prices to different insurers, and an even higher price to the uninsured.

Health care is an unusual product in that it is difficult, and sometimes impossible, for the customer to say “no.” In certain cases, the customer is passed out, or otherwise incapable of making decisions about her care, and the decisions are made by providers whose mandate is, correctly, to save lives rather than money.

. . .

The result is that, unlike in other countries, sellers of health-care services in America have considerable power to set prices, and so they set them quite high. Two of the five most profitable industries in the United States — the pharmaceuticals industry and the medical device industry — sell health care. With margins of almost 20 percent, they beat out even the financial sector for sheer profitability.

The players sitting across the table from them — the health insurers — are not so profitable. In 2009, their profit margins were a mere 2.2 percent. That’s a signal that the sellers have the upper hand over the buyers.

There's more at the link.

Unfortunately, the Washington Post article completely ignores the catastrophic financial condition of emergency medical services, and the impact of the Emergency Medical Treatment and Active Labor Act (EMTALA) of 1986. According to its Wikipedia entry (see previous link), this act:

... requires hospitals to provide care to anyone needing emergency healthcare treatment regardless of citizenship, legal status or ability to pay. There are no reimbursement provisions. Participating hospitals may only transfer or discharge patients needing emergency treatment under their own informed consent, after stabilization, or when their condition requires transfer to a hospital better equipped to administer the treatment.

EMTALA applies to "participating hospitals." The statute defines "participating hospitals" as those that accept payment from the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS) under the Medicare program. However, in practical terms, EMTALA applies to virtually all hospitals in the U.S., with the exception of the Shriners Hospitals for Children, Indian Health Service hospitals, and Veterans Affairs hospitals. The combined payments of Medicare and Medicaid, $602 billion in 2004, or roughly 44% of all medical expenditures in the U.S., make not participating in EMTALA impractical for nearly all hospitals. EMTALA's provisions apply to all patients, and not just to Medicare patients.

Again, more at the link. Bold print is my emphasis.

The American College of Emergency Physicians (ACEP) makes clear the financial impact of this legislation.

Many have interpreted EMTALA as the U.S. government's declaration of universal emergency health care for all, creating a federally enforced right to emergency care for any individual in the United States ... The government has created this safety net for the uninsured and indigent, but has provided no means of fiscal support for hospitals and physicians providing this federally mandated care. EMTALA has forced health care providers to assume the fiscal responsibility for providing care for all under the constant threat of fines, civil liability, and loss of provider participation in the Medicare and Medicaid programs. Emergency physicians bear the brunt of the financial impact of providing EMTALA mandated care, while maintaining access to care 24 hours a day seven days a week.

The cost of EMTALA mandated care is substantial for the emergency physician. According to a May 2003 American Medical Association (AMA) study, emergency physicians annually incur, on average, $138,300 of EMTALA-related bad debt. Approximately 95.2% of emergency physicians provide some EMTALA mandated care in a typical week and more than one-third of emergency physicians provide more than 30 hours of EMTALA-related care each week. Physicians in other specialties ... each incurred, on average, more than $25,000 of EMTALA-related bad debt in 2001.

More at the link. Once more, bold print is my emphasis. Those figures, of course, are almost a decade old - costs are much higher today.

Inevitably, hospitals and physicians who lose money on EMTALA-related expenses are going to want to recover their costs somehow. This has historically been achieved through cost-shifting: imposing higher charges on those able to pay them, in order to cover costs incurred by those unable to pay for their treatment. That's one reason why hospitals will charge patients up to a 1,000% profit margin (or more) for services - anything from the use of a room for a night down to routine consumables such as a bandage or an aspirin. It's an obscene premium, on the face of it: but the patients who pay those charges are, in effect, also paying for the services consumed by patients who can't or won't pay for them.

There are also different charges for insured versus uninsured patients. To cite just one example out of many revealed by an online search, here's what Lynn M. Petrovich experienced.

A family member became ill, and we had to go to our local emergency room. A total of 37 hours, including one night, was spent in the hospital. Then we got the bill. It totaled $16,808.

After the deductible, our insurance company paid $2,739. That’s it. Which begs the question: Which was the cost of the hospital’s services, $16,808 or $2,739?

I’ve spent months trying to get an answer to this question. Everyone at the hospital from accounting, to billing, the doctors and nurses, employees, former employees, collection agents, even the hospital’s Executive Director have been unable to articulate the tabulation of this invoice. I’m told “it’s complicated, very, very complicated” and “no one knows exactly how the bills are computed because it’s complicated.” There’s the chauvinistic approach: “Mrs. Petrovich, you don’t need to know because it has nothing to do with you.” And the demeaning: “It’s something you wouldn’t understand.” Of course then there’s the ever lovin’: “It’s just something we do, an adjusting entry, and no one really knows how it’s done because [you got it] it’s complicated.”

Without the knowledge of exactly how hospital bills are calculated, how can we ascertain if medical costs are indeed increasing? I mean if they’re just throwing darts at a board, we have no control or foundation for determining medical cost trends.

And quite frankly, how difficult can it be? I mean pardon the analogy, but it’s not brain surgery. It’s cost accounting 101.

Reviewing the hospital’s detail of services rendered, among the charges were $8,786 for the room (one night), and another $2,609 for the emergency room (2 hours – ouch!), and $368 for one X-ray (was it printed on gold?).

Here’s an interesting tidbit: If you can afford health insurance, the hospital will accept $2,739 as payment in full; if you can’t afford health insurance, you’ll owe more, like $16,808.

That’s not complicated, that’s sick.

More at the link. Once again, the higher charge for an uninsured patient is designed to make up for what the hospital loses by treating patients who can't or won't pay for their care. It's also an attempt to make up for the profits lost to hard-bargaining medical insurers who secure rock-bottom rates for their members (thereby making it harder for the hospital to show a profit for its investors).

It's a sad commentary on our society that its poorest members are charged far more for health care (and will, if necessary, be taken to court to force them to pay those charges) than those who can afford medical insurance. During my service as a pastor, I became involved in one case where a widow was facing a medical bill of over $20,000 for emergency care provided to one of her children. If she'd had medical insurance, the charges would have been less than $3,000! I asked the hospital whether she could pay the lower amount, in which case I'd take up a collection among my parishioners and we'd settle the account at once. I was immediately met with an aggressive demand that my church collect enough to pay the higher amount! When I refused, I was accused of 'not caring'! (Eventually we were able to negotiate the bill down to just over $5,000, and paid it off over about three months . . . but the incident left me with a very sour taste in my mouth.)

Anyway, that's an additional cost factor in US health care that the Washington Post completely ignored in its otherwise useful article. I wonder why so few politicians or journalists are willing to speak out about the costs imposed by an unfunded mandate such as EMTALA? I think they hope that if we don't know about it, they can go on imposing what is, to all intents and purposes and in all but name, an additional tax on hospitals, physicians and other providers of medical care. That's neither fair nor reasonable - particularly when the rest of us are forced to pay that 'tax' through higher charges!





Peter